Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1 Net Present Value-Unequat Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pleces of equipment have
1 Net Present Value-Unequat Lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pleces of equipment have an initial investment of $638,844. The net cash flows estimated for the two proposals are as follows: Net Cash Flow Year Processing MIH Electric Shovel $195,000 $244,000 174,000 226,000 174,000 209,000 138,000 215,000 105,000 88,000 76,000 2 3 5 6 76,000 The estimated residual value of the processing mill at the end of Year 4 is $240,000. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 N 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 3 4 0.579 0.792 0.683 0.636 0.572 0.482 S 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 10%. Use the present value table appearing above. Processing MINI Electric Shovel Present value of net cash flow total Lees amount to be invested Net present value Which project should be favored? Electric Shovel
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started